Posted
by
samzenpus
on Sunday April 14, 2013 @07:30PM
from the ready-set-panic dept.

First time accepted submitter HeadOffice writes "Mark Gimein points out that Bitcoing mining uses a lot of power, enough that it is a real world problem: 'About 982 megawatt hours a day, to be exact. That’s enough to power roughly 31,000 US homes, or about half a Large Hadron Collider. If the dreams of Bitcoin proponents are realized, and the currency is adopted for widespread commerce, the power demands of bitcoin mines would rise dramatically. If that makes you think of the vast efforts devoted to the mining of precious metals in the centuries of gold- and silver-based economies, it should. One of the strangest aspects of the Bitcoin frenzy is that the Bitcoin economy replicates some of the most archaic features of the gold standard. Real-world mining of precious metals for currency was a resource-hungry and value-destroying process. Bitcoin mining is too.' However, not everyone is convinced that virtual mining is as bad for the environment as the real thing."

Here is what I personally don't get, and maybe I'm wrong, maybe someone can enlighten me, but how EXACTLY is Bitcoins not a pyramid scheme?

I mean the guys could make a mint that got in on the ground floor, because mining was super duper easy, but as more and more enter it becomes harder and harder and now I seriously doubt anyone that isn't stealing the electricity will ever break even.

Now don't get me wrong, I like the IDEA of a completely non traceable currency, because like freedom of speech or a free Internet I believe the good far and away outweighs the bad, I just don't see how this particular system isn't a pyramid scheme. Maybe its the whole "mining" concept that is throwing me, who knows, but I looked at it last year and I just don't see how anybody getting in on the bottom today can even break even, kinda like...well a pyramid scheme.

"I mean the guys could make a mint that got in on the ground floor, because mining was super duper easy, but as more and more enter it becomes harder and harder and now I seriously doubt anyone that isn't stealing the electricity will ever break even."

That isn't why they made a killing. First, it wasn't "super duper easy" even in the beginning. I made a couple of bitcoins back in the early days, and it took my laptop grinding away for a total of about a couple of days each (I ran it overnight when I was sleeping).

That's not "super duper easy" when you consider that a Bitcoin was only worth about 50 cents to a dollar. You were lucky if you broke even on the electricity.

Most of the people who made lots of money in the market were not bitcoin miners (though that has probably changed if anybody has half a brain). It was the investors. People who bought bitcoins hoping their market value would go up.

But there's a problem with that, too, see. Last I checked (which wasn't very long ago), it was costing in the neighborhood of around $30 to mine a bitcoin, if you add up the amortized equipment cost, time and electricity. Yet Bitcoins went up as high as $250.

Wouldn't you like to be able to make something for $30 and sell it for $250? Yeah, me too. Of course it's down from that now but it's still selling for about 5 or 6 times what it costs to make. That's a pretty good markup. So people who are making bitcoins TODAY are making a killing. Not just the initial investors (though they did pretty well).

Which of course means more people will make Bitcoins, which means the price will come down, until the difficulty (cost) of making them is not that far from market price.

All you are seeing right now is a bubble. As long as they are selling for lots more than they cost to make, you are going to have an irrational, lopsided market that could crash at any time. But it's hardly a "pyramid scheme". There is lots of opportunity right now for somebody to invest in hardware and make a lot of money... if they do it quick.

"Isn't there a mechanism for adjusting the difficulty of mining depending on how much mining is done? Wouldn't that mean that the difficulty will go up if the price does, so that they will match?"

Yes, that is one of the things that would serve to bring the cost up to market place. While more miners will also bring the price down to the cost. (Actually, it's not "adjusted" per se. It's built in to the math. The more Bitcoins that are mined, the more difficult they become to mine.)

But my main point was that the market right now is very, very far from that equilibrium. It's completely irrational.

Breaking even on a CPU is nearly impossible nowadays, but the FPGA yields still a decent ROI. And creating 100BTC on a CPU in the early days took about as much time and money as creating 100BTC nowadays on FPGA.

Of course nowadays 100BTC is worth vastly more than early on, but that only means those who *bought* early got really rich. Those who mined early got rich only due to spending more time mining...

It is isn't a pyramid scheme, it is just ruined by speculators. And the worst kind of speculators, the dumb kind that buys gold from vending machines because prices are at record heights.

If you know ANYTHING at all about successful speculation, you know that you buy LOW and sell HIGH. The dumb speculators are however slow as well as dumb and only dive on say speculating in gold when prices are already high. Buy Apple stock 10 years ago. Smart. Buying Apple stock right now. Dumb.

Bitcoin is seen as having a high value right now, like say comic books had a while ago and dumb people think that this is then worth investing in with the logic that if you buy high, you can sell at even HIGHER! And really cleanup!

It doesn't tend to work that way. Instead, you can buy high because smarter speculators are SELLING high and they are selling because they don't think it is going to go any higher. Bitcoin as a anonymous paypal alternative has some merrit. As an investment, not so much. As a currency, none whatsoever. It would be like creating a currency out of comic books or bottle caps.

Fallout fans may be familiar with that idea, it is silly but do you fully understand HOW silly it is? Bottle caps were garbage once. How can you put a real world value on an item someone may at any point find a whole stockpile off, or worse, the machines that make them in the millions? North Korea has its defacto currency, the US dollar. Even loyalty taxes to the state have to be paid in it. NK ALSO had projects to create huge piles of counterfeit US dollars. Some ended up in the rest of the world but the majority of counterfeit US dollars is in NK circulation. NK has flooded its own economy with counterfeit currency they can't even hope to spend anywhere because if you had any brains and a North Korean handed you a wad of dollars you check every note individually.

Almost anything can be used as a currency, and has. Stamps have been used as currency almost exactly as Terry Pratchett described it in one of his latest books. In fact, paper money is an alterntive not that different from bitcoin to using real precious metals as barter counters. Nobody has a need for gold however, it was just for thousand of years convenient to barter for goods with a in between mechanism of gold/silver. I trade you my chickens for X gram of precious metal I have no need off because I know that I can barter that for clothes with that other guy.

ANYTHING will do for that, and has. There have even been cases of shops creating their own low currency for giving chance to small for real currency. You give me your silver coin and I give you produce and a chit saying that you still have some spending power left in this shop.

But what you NEED for a currency to be usable is some stability. Deflation is bad because it causes people to hoard and to much inflation hurts as well because if you pay me now, I will have far less tomorrow. Rampant speculation causing a currency to go rise and fall thousands of percent are useless. How am I going to price my goods when every second the currency has a different value.

Say you are going to sell beer for REAL (and not just as a novelty value, bars can afford to "sell" some beer just for a smile if 99% of the customers buy it for hard cash) for 1 bitcoin you might get within a day get anywhere between a dollar and a 400 dollars.

There is a reason people talk about HARD cash. Hard cash needs to be hard, have a consitent value. Salt worked once because people had a stable need for salt, a stable market existed so it could be reliable used to barter with. Comic books, baseball card, tulip bulbs and bitcoins don't.

It makes no sense to invest in it, you can only speculate in it if you understand what buying low, selling high really means AND until the idiot speculation stops it is even useless as a paypal alternative because you can't mark your products in bitcoins when that goes up and down per minute.

Although I agree that it is not a pyramid scheme in the classical sense, it shares some similarities. By designing the algorithm to have exponential complexity, the creators definitely designed it in their favor. The reason why it works and the price is rising, is because there are more and more users joining, if it was not the case the price of Bitcoins would slowly fall as the volume rises but the value is constant. This is the second similarity to a pyramid scheme, in that to sustain the current trend of raising price, it needs to have more value flowing into it. The current state of affairs is similar to a pyramid scheme.

On the other hand I would not know how to design a hashing scheme, that is not exponentially complex as the uncovered hashes exhaust. In addition the economic implication is interesting, once the Bitcoins are all uncovered, there is no room for any fiscal policy. Currently the most of the rise of Bitcoin is not about actual Bitcoin use, but rather economic speculation. And this will be a fun bubble to see burst.

I think it's a pyramid scheme in the same sense Visa corporation is. It's a currency system indelibly tied to a payment processing system. The currency and the network for sending payment are fundamentally linked. This is a feature that is not shared by any other currency. Credit card processors presently extract huge sums of money from the economy to process payments and bitcoin dramatically reduces or eliminates those costs. I wouldn't accuse initial investors in Visa of colluding to create a pyramid sche

I'd just like to point out that gold have had the same characteristic, in the beginning it's easy to mine/wash/find, but as time goes it's getting harder and harder as all the easy spots are cleared out. And it's only economical to mine those harder spots out because the value of gold have risen.

Would you say gold is a pyramid scheme, because it was easier in the beginning? Bitcoin is in many ways digital gold, where the rarity comes from the resources it takes to "extract" bitcoins. Gold itself is not curr

It's a fake currency because it's not backed by any government and there's no requirement that anybody take it. Whereas even Microsoft points are guaranteed to be taken by MS unless they stop taking them with prior notice. And they'd likely give notice of when they plan to do that if that ever happens; BTC not so much.

As much as folks disparage the USD, the fact of the matter is that I can at least be guaranteed that I can pay my bills with it and pay taxes, which is something that you cannot say about BTC.

All current currencies are "fake" (aka fiat) currency. And while the government does back currency, it is only of value because that is what the government requires in taxes, and the market demands of currency. However, when you realize that the government can take your currency (as in Cyprus) held in government backed banks, run by a government backed central banking system, you start realizing the government just might be the problem. Corrupt or bankrupt government means your value in currency is only as

Actually you get it backwards. A commodity is something you can actually use. Gold for example is used as currency and is a commodity, since it is used to make jewelry or electronics. Bitcoin is just a currency, you can't use it for anything. If Bitcoins are complacently devalued they are not worth the "bits they are printed on". Commodity that is also used as a currency, retains value if the actual currency is fully devalued. For example after WWII cigarettes where used as black market currency. But once the situation normalized and people started to get real money in their hands and could buy something for it, the cigarettes as currency where useless, but you could still sell them as cigarettes for real money.

About the fake part of Bitcoin, it's only fake as in there is not sovereign nation backing the currency, so what? Any currency is as good as the trust it is put into it by it's users. The currencies of nations tend to devalue too, as the users lose trust in that currency. For example during the perestroika in Russia many people used USD instead of the ruble, because they did not trust the ruble to be stable.

If anyone bothered to actually look up the definition of currency they would find one of its defined attributes is the condition of being generally accepted as a medium of exchange. Bitcoin is *NOT* generally accepted. That does not mean it can't become so; but it isn't a currency today.

The real problem with society at so many levels comes down to people trying to use our currencies for that which they were never really designed. Currency, money, and commodity are not fully interchangeable.

I'd like to see your conversation with the salesperson at a checkout point of a supermarket with you trying to pay for other purchased goods (of matching value) with a bag of potatoes.

It would be the same conversation that would occur were I to try paying with bitcoins.

Which brings us in a rather circular way back to the original point: there is no practical difference between someone accepting payment in bitcoins and someone accepting payment in a bag of potatoes. "Accepting payment in $FOO" doesn't make $FOO a currency, or money or tender of any sort. Criteria for what constitutes a currency is high enough that it disqualifies precious metals, after all. Bitcoin doesn't (yet?) satisfy the criteria for being a currency.

Now, it's possible that in the future bitcoins will satisfy the criteria for being a currency and everyone will trade in it... then you run into the same problem that we ran into with precious metals and cowrie shells: there is no match between the "currency" and the value it is supposed to represent (which is why precious metals were eventually abandoned as currencies).

Ironically, by following the same model used by precious metals (mining a finite resource at a specified and hard-to-change rate), bitcoins are doomed to be abandoned as currencies too... that's if they ever get adopted as currrencies - but I'm willing to give it the benefit of the doubt and say that it will one day achieve critical mass and take off, only to be shot down later when it runs into the same problems that gold and silver and diamonds and bronze and tools and cowrie shells and cows and goats and poultry ran into.

(If you'd like to read more email me; I'm about 75% done with a tiny eBook on money and it's development. There will eventually be a bitcoin section in there).

I assure you that I do. I'm not blinded by fanaticism as you seem to be. It doesn't matter how many well-reasoned arguments I've thrown your way, you simply ignore them and repeat the bitcoin party-line. Here's a tip - all those things you are spouting that you think are so new and novel that make bitcoin a currency? The world has heard it all before - we've seen this movie before. It's only new to you.

Bitcoin can be divided into two 0.5BTC pieces, or into 10,000 0.0001BTC pieces harmlessly and it doesn't cease to be a currency that way.

Actually, yes it does. Plus, you don't understand it at all, as is evidenced by you switching your argum

Considering that most people pay for their electricity by the kilowatt hour, the megawatt hour is not a bad unit to be using. It lets me say, for example, that it's about 200,000 times my average daily electricity usage (5 kWh on my last bill, probably because of the air conditioning). Much easier to compare scales.

Mind you, megawatts aren't bad either... they're just not as intuitively transformable to real-world scenarios for most people.

Reporters use the units of energy, so that the total would look much bigger than it is. 982MWh/day - I only use 1.2MWh in a month wow that's a lot, but remember that this is for the entire mining network, not for an individual miner. On the other hand, 41MW - that's not a lot, a hydroelectric power plant in my city is 100MW - that single power plant could power two bitcoin mining networks - I bet Google's servers use more power than this...

On where the power is coming from. Wind Powered bittcoin mining wouldn't be so bad right?

No. Electrical energy is fungible. So if you use wind power, there is less wind power available for others, so they have to use more coal power (or whatever). The result is the same as if you had just used the coal power directly. The only way it would make a difference is if the wind power was otherwise going unused (unlikely).

Not really. Say your energy grid has 100MW wind and 500MW coal and you're using 400MW. If your BitCoin mining adds 100MW consumption, you could always say it's using 100MW of wind power, but then that means whatever was using that power before now derives it from coal. It's just swapping numbers around.

Yes, it'd be hard to remove wind power from others, but that's only potential available energy, it's not realized and thus entirely irrelevant to the discussion, unless BitCoin mining magically builds wind farms.

So you think wind power is free energy? The original statement is most certainly true. Wind, like any other resource is limited. If you consume 100% of the energy in wind on the planet, you can't build another wind mill and get 100.1%. Wind farms slow and change the flow of wind.

If you use it, you do take it away for others. Ask ANY sailor (as in on a sail boat) what happens when someone takes the wind out of your sail. That saying is literal even if you don't realize its usage.

True, but you would need a vast, vast amount of turbines to have any significant effect. If the turbines do turn out to cause a problem it is very easy to undo too, you just turn them off or take them down. It isn't like pumping CO2 into the atmosphere.

Or perhaps I could just rely on nuclear energy, which has virtually none of the c word. We produce so much energy in Arizona that we actually sell it to California, and provide 25% of their energy supply. (A lot of their local governments want to boycott us still over SB1070, even though they have such little energy supply that they have rolling brown outs...such a poorly made decision.)

Wilson deregulated the *generation* of electricity in California- The only portion of a regulated utilities' electric bill that the utilities were *not* allowed to profit from. The system was begging to be gamed by those who bought up the power plants. On top of that, he took the private, cooperative operation of the transmission grid and handed it over to a state-run agency (CAL-ISO). Have you ever heard of a state agency doing anything efficiently?

What unused excess electricity are you talking about? Generating plants don't just run at full capacity with the unwanted energy going to waste. They adjust their output based on demand. All of the generated energy going into the electrical grid either gets dissipated as heat due to transmission line losses (a small percentage of the total, as noted by another poster), or is used by loads connected to the electrical grid.

A factory floor can switch off in matter of seconds if you use the emergency switch. A whole district can be switched off within minutes if there's a suspicion of a major gas leak.

Extinguishing a coal power plant boiler takes many hours. Sure the energy production can be reduced quite fast but then the coal doesn't stop burning and the water doesn't cease to be heated. Simply, the steam circles in the system bypassing the turbines and it will take hours till the temperature is reduced enough that only neede

A few years ago (2008?), much was made of the tidal capture planned for the Bristol Channel. The study on which the argument of both sides was based had calculated that capturing enough energy in the channel would supply the entire energy needs of England, Wales, Scotland and Eire, all the outlying islands and the North Sea Oil Rigs, and still only deplete 5% of the total amount of energy passing through the channel at any time. Capturing 100% of the energy would not only supply most of Europe, it would also result in a glass-smooth Bristol Channel. The surfing fraternity won the argument, saying that even a 5% drop in tidal energy would kill the tourism industry in the area since most of the coastal tourism in the area relied on the four foot breakers*!

*Yep, that's what was said. The Bristol Channel has a 47 foot tidal range, which is pretty much the highest tidal range of any estuary on the British coastline.

A few years ago (2008?), much was made of the tidal capture planned for the Bristol Channel. The study on which the argument of both sides was based had calculated that capturing enough energy in the channel would supply the entire energy needs of England, Wales, Scotland and Eire, all the outlying islands and the North Sea Oil Rigs, and still only deplete 5% of the total amount of energy passing through the channel at any time. Capturing 100% of the energy would not only supply most of Europe, it would also result in a glass-smooth Bristol Channel. The surfing fraternity won the argument, saying that even a 5% drop in tidal energy would kill the tourism industry in the area since most of the coastal tourism in the area relied on the four foot breakers*!

*Yep, that's what was said. The Bristol Channel has a 47 foot tidal range, which is pretty much the highest tidal range of any estuary on the British coastline.

No, the environmental crowd (quite rightly, for once) succesfully argued that the destruction of vast areas of mud flats would be ecologically disasterous for the local wildlife.

Britain is an island and so tidal power is intrinsically more promising than wind power. The Bristol Channel actually has the second highest tidal variation in the world for a river estuary. (When I was a child it was claimed as biggest in the world but they found a bigger one in China.) It is absolutely ideal for a tidal power station. Virtually free energy. So I suppose it was inevitable that the misguided green/ecology lobby would get the project killed.
Tidal Power stations are not remotely as polluting and intrusive as traditional coal or gas burning ones. It's just capturing the rise and fall of the tide. It could easily have been built with minimal damage to the mud flats and bird populations provided that was part of the spec. Yes it would end surfing upstream but so what??? Surfing off the coast of Cornwall should be unaffected.

I don't remember the term for it, but if you own a business it can be said that it makes a profit, but at the same time it loses money. The reason for this is it's not making enough money vs what an investor would get putting his money in a different investment. So let's say you're making your expenses plus 5%, the investor is mad because he might get a 6% interest rate if he loaned his money to someone else.

I suspect the same thing would apply to generating electricity specifically to mine bitcoins. You

retty soon it's hard to see why anyone would seriously consider bitcoin mining for profit unless they have (free) access to many idle machines

Exactly. And it is designed to be that way.

Its a short term problem at worst. Soon no one will bother to mine bitcoins. There will be easier ways to acquire them, such as actually producing a good or service.Mining will become less important in the future (as it becomes less profitable).https://en.bitcoin.it/wiki/Controlled_Currency_Supply [bitcoin.it]

CONGRATULATIONS, sir, you have picked door #2, marked "Bitcoin mining will eventually stop." Behind that door we have... that bitcoin is a pyramid scheme. Also, congratulations to the zombie botnet owners of the world, who will soon be owning most bitcoin.

How very fortunate you did not pick door #1, the door marked "Bitcoin mining will pay for itself in perpetuity." Behind that door you would have found a colossal waste of resources. For every unit of value a bitcoin represents, the same value would be wasted by the mining machines, leading to economic loss and global warming escalation.

Bitcoin is a cool technology experiment - but in the end, it's just a bad idea.

Its a short term problem at worst. Soon no one will bother to mine bitcoins. There will be easier ways to acquire them

Or more likely, people will ignore them. I know this is Slashdot and we must have a Bitcoin story in here every day, but outside of here no-one I know talks about or even knows anything about Bitcoin. I know a little bit about it, and even I'm not going anywhere near it, what is going to change that makes regular Joe give up his known and easily understandable concept of cash for some magic complicated fairy dust that you need a math education to figure out if it's a scam or not?

I know a little bit about it, and even I'm not going anywhere near it, what is going to change that makes regular Joe give up his known and easily understandable concept of cash for some magic complicated fairy dust that you need a math education to figure out if it's a scam or not?

Just because Regular Joe can't find a use for it, doesn't mean it's of no use to anyone. Already drug dealers and their customers have found it useful. Whether you and I find that morally offensive or not, it's still a practical use. I can well imagine people in third-world countries and oppressive regimes using it to transfer money abroad in circumstances where mainstream methods are too expensive or forbidden by the authorities.

Incorrect. Mining is the process that adds transactions to the block chain. If there is no mining, then the entire system grinds to a halt, and existing bitcoins cannot be spent.

The mining reward serves two purposes: 1) Gradually introduce bitcoins into the system over a period of time. 2) Provide an incentive for people to mine while the system is still young and not yet widely adopted. Once the mining rewards dwindle to zero (i.e., all of the bitcoins have been created), then transaction fees remain as an incentive to miners. Many current miners will probably drop out of the pool by the time the mining reward is reduced to zero, but mining will still be necessary to make the system work.

Er, do you even know how bitcoin works? The mining process is essential to verifying the history of transactions. The fact that it's also used to generate bitcoins is just something that's tacked on in order to make it profitable for people to mine.

(Also, after all bitcoins are generated, miners will still get the fees from transactions, so it should hopefully stay profitable.)

Depends where you live. It'd be more like $200,000 where I'm from. If you only pay $0.10/kWh then its ~$100,000. USA pays around 8-17c depending where you live, or 37c in Hawaii. I pay about 25c.

The poor Australians pay 22-46c/kWh. They also run air conditioning for a good portion of the year. More bitcoin mining = more heat = more aircon load. It doesn't work the other way around in winter though, unless you heat your house with crappy heaters. Average heat pumps produce 4x more heat than they consume, so

Entirely untrue. Heat pumps MOVE energy from one place to another. They do not produce heat (well, ideally they do not, due to naturally being less that perfectly efficient they do) nor do they absorb it. When you turn on the heat, they just gather up some of the heat outside and provide it to you on the other end. When cooling, they just gather some heat from inside your home and dump it outside.

Hard to say how bitcoin compares to mining gold and silver when you don't even know how much bitcoin is worth. If bitcoin gains enough value, they might be better for the environment than printed paper money.

How much is bitcoin worth? There was an interview recently with some 'bitcoin millionaires', people who had a million dollars worth of bitcoin. That of course raises the question: if they sold their bitcoin, would there be enough buyers to actually get them a million dollars? Or would such a large sale cause the market to collapse?

The other thing is that bitcoins have a finite shelf life, as opposed to precious metals which we know last almost indefinitely. Once a break is found for SHA-256 or Elliptic Curve DSA (the two cryptography primitives used by the bitcoin protocol), bitcoins will be worthless. It's not likely that this will happen any time soon, but 20 or 30 years from now? Definitely plausible. At that point, all the money spend on mining will essentially evaporate.

IANABP (I am not a Bitcoin Proponent, I own exactly 0BC and will not in the forseeable future), but I am interested in the idea and mechanisms involved.

If a break is ever found, suspected, or even slightly likely an orderly migration to better cryptographic primitives can be performed. If you are interested in knowing more the wiki [bitcoin.it] enumerates all the known possible attacks.

Makes sense, although I imagine if it actually happens it is going to be a lot more complicated than they think. Just look at the recent mixup with the two client versions that supported different block sizes.

The other thing is that bitcoins have a finite shelf life, as opposed to precious metals which we know last almost indefinitely. Once a break is found for SHA-256 or Elliptic Curve DSA (the two cryptography primitives used by the bitcoin protocol), bitcoins will be worthless.

Contingencies for such things are already designed into the system. It's not a requirement that the system must always use SHA-256. If SHA-256 becomes too weak in the future, then the bitcoin protocol can be revised to use a replacement system. This would need to be done with planning an care, as the system does depend on the clients agreeing about what protocol is to be used. If SHA-256 was suddenly broken wide open with no warning, that might prove fatal to the system. However, it's more likely that there

That's exactly what you're supposed to believe. If everyone was getting rich quick then what would be the point? I mean, if I knew where some buried treasure was and it's location was published online, I'd be the first to be out there telling everyone it was a scam and to steer clear...

IMO, that's arguably the BEST part of the whole bitcoin thing! It's a working experiment in creating a new, world-wide currency free of any central banking controls.

Its not free of central banking controls. As others have pointed to when theoretical weaknesses of the existing protocol were pointed out, the protocol can be (and has been) evolved by consensus of a sufficient subset of those mining (verifying transactions, even once actually producing new bitcoins is no longer a function.) As that's weighted b

That's "41 megawatts" for those of you who prefer it in non-retarded units. In case you were wondering, that's 0.003% of the US's electrical generation capacity. Yeah, that's a real environmental disaster, there. It's not a problem, it's a rounding error.

41MW is a rate of flow, not a measurement of volume. This is a 2 dimensional vector. They are made up of volts, amps, without time. It is an instantaneous measurement of flow at a specific instant in time, not over a span of time.

41MWh is a volume of energy usage.41MW per hour is the same as above. These are 3 dimensional vectors. They are made up of volts, amps, and time.

41MW hours per hour would be a rate of accelerating power consumption, this is like 9.8 meters per second per second for gravi

I'll give you the benefit of the doubt that you're not trolling, although equalling MWh to MW per h is pretty close.

"rate of flow", "volume", is that what they teach in schools nowadays? Watt is the unit of energy conversion per time, also known as work. Watt times time is energy. Watt per time would be energy per time^2 and makes absolutely no sense.

So MWh are a unit of energy. MW are a unit of power. MW per hour (MW/h) are a uinit of accelerating power consumption. MWh per hour (MWh/h) are the same thing as MW (the hours cancel).

Its nice of you to rant about how someone else is wrong, but next time, calm down and actually get it right yourself. In your huff and puff, you turned volume into acceleration, probably in a typo. But it left me a pedantic place to respond;)

So we take a controlled monetary system and try to create a better monetary system and then spend effort analyzing how it fails?

The problem with the existing monetary system isn't that it's controlled by a small group of people, it's that those people are corrupt and are manipulating the system. Bitcoin has the same problem, it's just obscured because the people 'mining' the system aren't a central group, they're a distributed group.

This is crowd sourced corruption, nothing more. If you didn't expect there to be costs related to tens of thousands of people running resource intensive software to game a system designed to protect people from responsibility.. you're kidding yourself. Quit wasting time analyzing why bitcoin isn't going to get anywhere and just accept it.

If you're able to game the monetary system, then it's lost it's value.

I'm curious about your reasoning. I can buy bitcoin with dollars and sell bitcoin for dollars and use dollars to purchase goods and services. Bitcoin in itself may not replace dollars but offers an alternative exchange method which may be more convenient than dollars in some instances. For example, I might do some web design work for a company in Greece, and I'd gladly take payment in bitcoins which I'd then sell immediately to get dollars. I'd declare the value of the dollars as part of my income for tax p

Digital mining has one massive advantage over real-world mining - Moore's Law. In 5 years when FPGAs and GPUs are churning out 2-3x the current bitcoin rate at far less power requirements per bitcoin less power will be required to do the same work.

Actually they already use GPUs - and there are companies making ASICs now. Dedicated Bitcoin mining boxes. The people who purchased GPUs specifically with mining in mind are apparently already annoyed, because the new computational power coming online means they are seeing less return, due to the increasing requirements as the number of mined bitcoins increases.

So once 21 million is hit...no more power is needed, because you can't generate more?

When I read that, I thought 21 million is not a lot of coins for the whole world to use. It seems screwy to me. You run into the issue that you run into with gold, if that is the case. You can't buy a loaf of bread with gold because it is worth so much.

> While the number of bitcoins in existence will never exceed 21 million, the money supply of bitcoins can exceed 21 million due to Fractional-reserve Banking.

I've tried and tried to wrap my head around this, but it makes no sense to me. How can you have fractional-reserve banking if the coins have to match a digital signature? Fractional-reserve banking creates money out of thin air. How can you create bitcoins out of thin air? And if they are just used as backing for a fiat currency, who is to say that someone kept enough bitcoins in stock to cover the fiat money?

It's not quite that simple. Fractional-reserve banking creates promises of money out of thin air. You can do fractional-reserve banking with gold coins, barrels of oil, strawberries, or any other commodity.

Even that's not quite fair to say, because every promise of money created is created at the same time as a right to future money, so the total net amount of money isn't changed.

In 1925, the Gold Standard in England was set at three Pounds twenty Shillings and change. The Bank of England was authorised to print gold certificates (later to become promissory notes) to nine times the amount of gold it held in its vaults. In 1931, the 1925 Standard was abolished, and the BoE was authorised to not only deny any requests to make good on any certificate, they were authorised to print even more certificates to the total amount of national and Government debt(!), add the words "I promise to pay the bearer on demand the sum of..." on all its new issue promissory notes (they weren't called certificates now) and also the phrase "This note is legal tender for any debt" (or something like that). What this created was a fiat currency that had by 1932, a gold backing of something like.01%, and by the time decimalisation kicked in in 1971, the amount of gold ratio to the amount of currency in circulation was so low as to constitute a rounding error no computer of its time could calculate. What we have now since even the Silver Standard is abolished is like the United States, a currency that has zero intrinsic value (it is literally worth even less than the paper it was printed on), it's current value being based on the amount of book debt held by the banks against the amount of currency in circulation measured against similar situations of other currencies. If the Dollar takes a dive, Sterling follows. If the Euro falls off a cliff, as it has done since its inception, so does the Dollar. The only thing that keeps any of these currencies afloat is the seizure of lands and properties resulting from subpar mortgaging and artificial hiking of house prices, and the sheer audacity of private financial institutions in their recent activities in Cyprus and Ireland. At least Iceland had the balls to tell the bankers to go fuck themselves.

No, the bank can loan out 95 strawberries. If those 95 loaned strawberries are deposited in another bank, that bank can loan out (95*.95) strawberries. If those strawberries are loaned out, and deposited again, now we're up to (95*.95*.95) strawberries, and an equal number of strawberry IOUs. If this process happens an infinite number of times, eventually the number of strawberry IOUs will be 2000. But every single deposit or loan will have involved a real strawberry.

Again, the government actually can create fiat currency by taking a piece of paper and writing "$100" on it, but fractional reserve banking always balances inputs and outputs. And despite what somebody upthread implied, it's been around since the middle ages.

So once 21 million is hit...no more power is needed, because you can't generate more?

The 21 million BTC figure is asymptotic. The reward for a successful hash halves every so often as the total minted value approaches 21 million. But each Bitcoin transaction can include a voluntary "transaction fee", a tip paid to the miner who includes the transaction in the next block. After that point, miners will seek tips rather than newly minted bitcoins.

So once 21 million is hit...no more power is needed, because you can't generate more?

"Mining" actually means maintaining the Bitcoin public ledger. So it will still be needed once all coins have been mined. Profits will come from transaction fees instead of minting new coins, and power will still be used.

When I read that, I thought 21 million is not a lot of coins for the whole world to use. It seems screwy to me. You run into the issue that you run into with gold, if that is the case. You can't buy a loaf of bread with gold because it is worth so much.

They can be divided into something like 0.0000000001 BTC so that is not an issue, if the economy got huge you'd price stuff in milli-BTCs or micro-BTCs. But you're getting close to why people think it's a pyramid scheme, to fit a trillion dollar economy in 21m BTC the exchange rate would have to rise to almost $50k/BTC. Actually $100/BTC already seems crazy, it'd put the total value at $2100 millon - until anyone big tries to cash out anyway.

I've tried and tried to wrap my head around this, but it makes no sense to me. How can you have fractional-reserve banking if the coins have to match a digital signature? Fractional-reserve banking creates money out of thin air. How can you create bitcoins out of thin air?

Let's say people deposit 100 BTC in the bank, now the bank lends 90 BTC to others while keeping 10 BTC as a fractional reserve, that might appear as 190 BTC (100 deposits + 90 loaned out) but it is only an illusion. If the people wanted to withdraw their 100 BTC the bank would be bankrupt because it only has 10 BTC in reserves, it is waiting for the other 90 BTC to be paid back with interest. In reality you'd probably secure yourself against bank runs like that by offering fixed interest rates so people can't withdraw all at once and cause a cash shortage and the bank could lend somewhere else with the loan portfolio as security. As long as none of the loans are defaulting, there's no real problem with this.

The problem is when they are defaulting, like we saw now in the financial crisis, if those "90 BTC + interest" is full of rotten loans and only 80 BTC will ever be paid back then 80 + 10 (the reserve) = 90 BTC is less than the 100 BTC the bank owes people, the bank is bankrupt and the account holders lose part of their money. Really nothing of this is specific to Bitcoin, you can replace it with USD throughout and that is how fractional reserve banking works. Normal banks (that is, not the national bank) doesn't actually print any money, they just make it seem more if you count deposits and loans many times (since those money loaned can be deposited.to be loaned out to be deposited to be loan just minus the fraction in each round).

I don't think many critics actually understand the dual purpose of mining. It's not only to govern the supply of new money, but also to protect the block chain. Many attacks require that the attacker control more computational power than 50% of the network, which is a lot of hardware.

Eventually mining slows down and transaction fees become the dominant reward for mining new blocks. So transaction fees will essentially be the "security cost" for protecting the network against a centralized attack. It's anyone's guess where they'll eventually stabilize.

Correct me if I'm wrong, but from my amateur knowledge of Bitcoin, doesn't mining both find coins in new blocks, as well as verifying transactions in exchange for a portion of the fee set aside for such? ie. when a transaction is performed, a small amount (under 1%) is typically marked as compensation for those who verify the transaction, which is needed as otherwise no-one would waste power on verifying transactions.

According to that understanding, the mining process makes sense, as it's providing an incentive for early adopters to adopt. It will gradually taper off to zero, at which point all miners are paid by the transaction fees, which is the ultimate goal of the system.

And honestly, computers verifying Bitcoin transactions has to be a lot more eco-friendly than the number of people needed to watch over credit and debit card transactions.

No. The rate of coin generation is fixed. The difficulty, however, is not. It increases.

Or decreases if the computational power of the network drops (granted advances in technology make that unlikely in the long term, and only minimally impactful in the short term). The difficulty self adjusts SO that the rate of coin generation remains largely fixed.

They're not independent variables, the more power you have the faster you can compute an equation to match the current difficulty, and earn more coins, it just also happens that the difficulty is self adjusting so that the rate which coins are f